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TMI Blog2011 (9) TMI 467X X X X Extracts X X X X X X X X Extracts X X X X ..... ha for the Appellant. Shri Ajay Vohra, Kavita Jha and Shri Somnath Shukla for the Respondent. JUDGMENT A.K. Sikri, J. - This appeal pertains to one issue only which concerns the interest paid by the respondent-assessee on the borrowed funds. There is no dispute that the interest was, in fact, paid. The only issue is as to whether this interest had accrued in earlier years or in the assessment year in question, viz., 2000-01, in which year the assessee had claimed the deduction thereof. According to the Assessing Officer (AO), such as deduction was not permissible in this year as the interest had accrued in the earlier years, which should have been claimed in those years only. 2. The CIT (A), however, found otherwise and allowed the deduction, which has been affirmed by the Income Tax Appellate Tribunal (hereinafter referred to as 'the Tribunal') as well vide impugned decision dated 07.11.2008. Though as many as five questions are proposed on the aforesaid issue, following two questions, out of these would reflect the nature of challenge which has been laid to the orders of the Tribunal: "1. Whether the Income Tax Appellate Tribunal was correct in law and on fac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ling its affidavit in reply to the notice of motion filed by the RCL. 5. After sometime, RCL and the assessee entered into settlement and consent terms dated 08.10.2001 were recorded. On these consent terms, decree dated 08.2.2001 was also passed by the Bombay High Court. As per the aforesaid settlement/decree, the assessee agreed to pay principal sum of Rs. 1 Crore with simple interest @ 24% per annum from 24.08.1995 till the date of payment and it was further agreed that the amount would be paid on or before 01.6.2001. The assessee paid the amount of Rs. 1 Crore along with interest from 24.8.1995. 6. Under these circumstances, the assessee claimed deduction of the aforesaid interest in the year in question, as according to the assess, the liability got crystallized when the consent decree dated 08.2.2001 was passed which event occurred in the assessment year in question. 7. The AO, on the other hand, took the view that there was no dispute until 14.10.1997. Even when the assessee had defaulted in making payment of exact amount, the liability to pay the interest was always acknowledged to the assessee. The dispute was raised vide letter dated 14.10.1997 and therefore, till t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rred to the following judgments: (i) Indian Timber Corpn. v. CIT [1993] 200 ITR 405 (Ori.)]; (ii) Bikaner Gypsums Ltd. v. CIT [1969] 73 ITR 778 (Raj.) (iii) CIT v. SKG Sugar Ltd. [1974] 96 ITR 194 (Pat.). 11. There is no quarrel about the aforesaid proposition. The entire dispute raised on the question, which needs to be addressed, is that whether the AO was right in holding that there was no dispute until 14.10.1997 and the liability to pay the interest had accrued till that date and therefore, interest payable was to claim as deduction during that period, i.e., 24.08.1995 to 14.10.1997, in the relevant assessment years and not in the assessment year in question, i.e., A.Y. 2000-01 or whether the opinion of the CIT (A)/the Tribunal is correct, viz., that there was a dispute throughout the period and no liability to pay interest had accrued in real sense which accrued only in the Assessment Year in question when decree passed by the High Court of Judicature at Bombay was passed. 12. In order to support the view taken by the AO, Mr. Sahni referred to the judgment of this Court in the case of CIT v. Dalmia Dadri Cement Ltd. [1992] 195 ITR 290 holding as under: "In CIT v. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was not able to pay the amount, could not be a reason to say that the interest liability had not accrued. 14. Mr. Ajay Vohra, learned counsel appearing for the assessee, on the other hand, relied upon the views taken by the CIT (A) as well as by the Tribunal and contended that no liability of payment of interest had accrued till the passing of decree in terms of settlement arrived at between the parties. To demonstrate this, he has filed the pleadings in the suit filed by the RCL against the assessee in the Bombay High Court and the affidavit and reply of the assessee to the notice of motion along with some other documents have been produced before us. We have perused the same. 15. The facts emerging on record show that the RCL had filed the suit claiming the principal amount along with the entire interest including penalty interest had become due from 24.08.1995. The reply filed by the respondent discloses that the respondent had controverted the allegations made in the plaint filed by the RCL and had denied its liability. The defence put forth by the assessee was that the RCL had already exercised its right under the Pledge Agreements after the incident of default, pursuant ..... X X X X Extracts X X X X X X X X Extracts X X X X
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